Bloomberg 11/22/22

The European Central Bank will deliver
another “robust” interest-rate increase next month, though it’s
premature to settle on its size just yet, according to
Bundesbank President Joachim Nagel.
Inflation data due before the Governing Council’s Dec.
14-15 meeting and new economic projections through 2025 will be
key to determining whether a third straight 75 basis-point hike
is needed to tackle record inflation, or whether a half-point
step is sufficient, Nagel told journalists in Frankfurt.
Either way, the ECB’s efforts on rates should be
complemented by a reduction in the stash of bonds it bought as
stimulus during recent crises, starting early next year, he
said.

Bloomberg 12/20/22

Bank of Japan Governor Haruhiko Kuroda just
gave investors a glimpse of what to expect when the world’s
boldest experiment with ultra-loose monetary policy comes to an
end.
In the face of sustained market pressure, Kuroda shocked
markets Tuesday by saying he’ll now allow Japan’s 10-year bond
yields to rise to around 0.5%, double the previous upper limit
of 0.25%.
Whether this is a strategic tweak to buy time for his
yield-curve control settings until his decade-long term ends in
April or the start of the end for his unprecedented monetary
easing remains to be seen.
But one thing is clear: a crack has opened that markets
around the world will keep prising in the weeks and months
ahead.
“This is a step toward an exit, whatever the BOJ calls it,”
said Masamichi Adachi, chief Japan economist at UBS Securities
and a former BOJ official. “This opens the door to a chance of a
rate hike in 2023 under a new governorship.”

Bloomberg 11/17/22

Fed Daly Says Rate Peak Between 4.75%-5.25% a Reasonable Range

Federal Reserve Bank of San Francisco President Mary Daly said 4.75% to 5.25% was a “reasonable” range for where the US central bank could lift interest rates and then go on hold.
“Somewhere between 4.75 and 5.25 seems a reasonable place to think about as we go into the next meeting,” Daly said in a Wednesday interview on CNBC. “And so that does put it in the line of sight that we would get to a point where we would raise and hold.”

Reuters 11/21/22

Kevin McCarthy, the Republican leader in the U.S. House of Representatives, said on Sunday he would form a select committee on China if he is elected speaker of the chamber, accusing the Biden administration of not standing up to Beijing.
"China is the No. 1 country when it comes to intellectual property theft," he told Fox News in an interview.
"We will put a stop to this and no longer allow the administration to sit back and let China do what they are doing to America."

Bloomberg 11/10/22

Treasuries rise sharply to fresh highs of the day, soaring after October CPI data prints below estimate. Fed-dated OIS market drops sharply, almost pricing in a 50bp move at the December Fed meeting instead of another 75bp hike.
Futures volumes surge with almost 100k 10-year note contracts trading in the post-CPI bid; 10-year yields drop to around 3.94%, richer by 15bp on the day while 2s10s spread re-steepens
Fed-dated OIS pricing in 52bp rate hikes for the December meeting vs 58bp priced Wednesday close; further out Fed peak drops to 4.88% by May next year, down from 5.05% prior close

Bloomberg 11/2/22

People’s Bank of China Governor Yi Gang gave
an optimistic outlook for the economy on Wednesday, saying it
remains “broadly on track” and he hoped the property market can
achieve a “soft landing.”
Currency
We follow a flexible and, by and large, market-determined
exchange rate regime with reference to a basket of currencies.
Since the beginning of the year, thanks to sound long-term
fundamentals of China’s economy, the RMB remained relatively
stable against a basket of currencies, with some depreciation
against the USD and somewhat appreciation against other major
currencies. In the future, we will keep on with the market-
determined exchange rate regime. The RMB exchange rate will
continue to remain relatively stable at a reasonable and
appropriate level, maintaining its purchasing power and keeping
its value stable.

Economy

I should say that the Chinese economy has remained broadly
on track, despite some challenges and downward pressures. The
Chinese economy has proved to be quite resilient. In Q3 the GDP
grew by 3.9%, up by 3.5 percentage points over the second
quarter. The job market remains stable with the surveyed
unemployment rate posting 5.5% in September.
Thanks to a bumper grain harvest and stable supply of coal
and electricity, inflation remained subdued. The CPI increased
by only 2.8% year-on-year in September and PPI increased by 0.9%
year-on-year.
I expect China’s potential growth rate to remain in a
reasonable range. China has a super large market, as there is
still much room for urbanization and demand of middle-class
consumers is still on the rise. Thanks to a large group of
engineers and skilled workers, China has built a full-fledged
modern industrial system, and a high-quality infrastructure
network.

That's why I've said it's appropriate to slow the pace of increases. So that time is coming. And it may come as soon as the next meeting or the one after that. No decision has been made. It is likely we'll have a discussion about this at the next meeting, a discussion. To be clear, let me say again, the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive which will be our principle focus.

POWELL:
That's meant to put that question really as the important one now going forward. I've also said that we think that the level of rates that we estimated in September, the incoming data suggests that that's going to be higher. That's been the pattern. I would have little confidence that the forecast, if we made a forecast data, if we did SEP today, one after another that will go up. That will end when it ends. There's no sense that inflation is coming down. If you look at the -- I have a table of the last 12 months of 12-month readings, there's really know pattern there. We're exactly where we were a year ago. Okay. So I would also say it's premature to discuss pausing. It's not something that we're thinking about. That's really not a conversation to be had now. We have a ways to go. The last thing I'll say is that I would want people to understand our commitment to getting this done and to not making the mistake of not doing enough or the mistake of withdrawing our strong policy and doing that too soon. I control those messages. That's my job.

11/2/22

Following is the FOMC statement released today by the Federal Reserve in Washington:
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3-3/4 to 4 percent. The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

Bloomberg 11/1/22

Job Openings in US Unexpectedly Rise, Keeping Pressure on Fed
Vacancies climbed by 437,000 to 10.7 million in September
Quits rate held at 2.7%, while number of hires eased

US job openings unexpectedly rose in September, highlighting enduring tightness in the labor market and risking sustained upward pressure on wages that will likely keep the Federal Reserve on a path of steep interest-rate increases.
The number of available positions increased to 10.7 million in September from a revised 10.3 million a month earlier, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. The median estimate in a Bloomberg survey of economists called for a drop to about 9.8 million.
The surprise pickup in vacancies highlights unrelenting demand for workers despite mounting economic headwinds. The persistent imbalance between labor supply and demand continues to underpin robust wage growth, adding to widespread price pressures and reinforcing expectations for yet another large rate hike on Wednesday.

Bloomberg 11/3/22

*ECB'S VISCO: MARKETS' PEAK RATE OF 3% IS `A POSSIBILITY'
*ECB'S VISCO: RATE HIKES SHOULD BE `GRADUAL, CONTINUOUS'
*ECB'S VISCO: NORMALIZATION MEANS TIGHTENING GRADUALLY

AAP 11/1/22

RBA hikes interest rates 25 basis points
The Reserve Bank of Australia has hiked rates by another 25 basis points on Melbourne Cup day, adding to the pressure already felt by mortgage holders.

The central bank has pulled the trigger on another 25 basis point rate rise and upgraded its peak inflation forecasts off the back of a surprise surge in the cost of living.
The seventh hike in the Reserve Bank of Australia's policy tightening cycle brings the official cash rate to 2.85 per cent.

Bloomberg 11/1/22

“If we need to step up to larger increases again to secure
the return of inflation to target, we will do that,” Lowe said,
reiterating the bank isn’t on a pre-set path. “Similarly, if the
situation requires us to hold steady for a while, we will do
that.”
The RBA has raised rates by 2.75 points since May and broke
ranks with global peers last month when it surprisingly pivoted
to smaller hikes following four consecutive half-point
increases.
“The board judged that it is appropriate to move at a
slower pace while we assessed the data, the economic outlook and
the impact of the rate rises to date,” Lowe said. “The board’s
base case remains that interest rates will need to go higher
still to bring inflation back to target.”

Bloomberg 11/1/22

The RBA also provided headline numbers from its quarterly
update of forecasts that will be released in full on Friday. It
expects inflation to now peak at around 8%, slightly up from a
previous 7.75% and remain above 3% through 2024.

Bloomberg 11/7/22

Australia’s central bank increased its
forecasts for inflation and wages growth and highlighted the
risk of a price-wage spiral emerging among key reasons it
expects to raise interest rates further.
Headline inflation is now seen peaking at 8% this year,
from 7.75% previously, the Reserve Bank said Friday in its
quarterly Statement on Monetary Policy. Both the headline and
core measures are predicted to remain above the RBA’s 2-3%
target over the next two years. The RBA had, in August,
predicted both measures would hit the top of its band in late
2024.
Today’s forecasts assume the cash rate will rise to 3.5% by
next June before easing back to around 3% by end-2024. The
exchange rate is assumed to be unchanged at current levels.

POWELL:
That's meant to put that question really as the important one now going forward. I've also said that we think that the level of rates that we estimated in September, the incoming data suggests that that's going to be higher. That's been the pattern. I would have little confidence that the forecast, if we made a forecast data, if we did SEP today, one after another that will go up. That will end when it ends. There's no sense that inflation is coming down. If you look at the -- I have a table of the last 12 months of 12-month readings, there's really know pattern there. We're exactly where we were a year ago. Okay. So I would also say it's premature to discuss pausing. It's not something that we're thinking about. That's really not a conversation to be had now. We have a ways to go. The last thing I'll say is that I would want people to understand our commitment to getting this done and to not making the mistake of not doing enough or the mistake of withdrawing our strong policy and doing that too soon. I control those messages. That's my job.

Bloomberg 10/20/22

Federal Reserve Bank of Philadelphia President Patrick Harker said officials are likely to raise interest rates to “well above” 4% this year and hold them at restrictive levels to combat inflation, while leaving the door open to doing more if needed.
“We are going to keep raising rates for a while,” Harker said Thursday in remarks prepared for an event with the Greater Vineland Chamber of Commerce in Vineland, New Jersey. “Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year,” before pausing hikes sometime next year, he said.

Bloomberg 10/27/22

The following is a reformatted version of the introductory remarks of European Central Bank President Christine Lagarde at a press briefing on Thursday:
“Good afternoon, the Vice-President and I welcome you to our press conference.
The Governing Council today decided to raise the three key ECB interest rates by 75 basis points. With this third major policy rate increase in a row, we have made substantial progress in withdrawing monetary policy accommodation. We took today’s decision, and expect to raise interest rates further, to ensure the timely return of inflation to our two per cent medium-term inflation target.

Bloomberg 10/27/22

European equities erased earlier losses as the region’s central bank raised interest rates while its statement was seen as less hawkish, with traders paring bets on longer-term interest-rate hikes.
The Stoxx Europe 600 was up 0.2% by 2:17 p.m. in London after the ECB doubled its key interest rate to the highest level in more than a decade through a 75 basis points hike. At the same time the central bank slightly tweaked its policy guidance to remove reference to “next several meetings.”
Rates-sensitive technology shares trimmed declines after the decision, while real estate and banks outperformed.
While the ECB said that it expects to raise interest rates further, it adopted a slightly less hawkish tone. That led money markets to cut rate-hike wagers by as much as 20 basis points, pricing a peak below 2.75% next year. That compares with above 3.25% seen as recently as last week.
“Markets are happy with the more dovish tone of the ECB, as it indicated the pace of tightening would slow going forward,” said Esty Dwek, chief investment officer at Flowbank SA.

(AFP) 10/27/22

ECB to decide how to trim balance sheet in December: Lagarde

European Central Bank policymakers will determine at their next meeting in December how to start winding down the Frankfurt-based institution's huge pile of public and corporate debt.
The ECB would determine the "key principles" to trim its massive balance sheet, which has swelled to trillions of euros over years of expansionary measures aimed at nudging up stubbornly low inflation.

Bloomberg 10/21/22

Treasury Yields Jolted From Highs on Prospect of Fed Let-Up
10-year yield still on track for 12th straight weekly increase
Five-year note’s rate topped 4.5% for first time since 2007

The US five-year Treasury yield exceeded 4.5% for the first time since 2007 on Friday on the prospect of unrelenting Federal Reserve rate increases to control inflation. It subsequently slid to the lowest level of the day on a report undercutting that thesis.

Earlier, yields across the maturity spectrum reached multiyear highs led by the 30-year, which rose as much as 14 basis points to 4.36%, the highest since 2011. The five-year yield rose as much as six basis points to 4.504%. By mid-morning, short-dated rates were lower on the day while long-dated ones remained higher.
The reversal in short-maturity yields occurred after the Wall Street Journal reported that some Fed officials are concerned about overtightening, after having raised the policy rate by three percentage points since March, with another three-quarter point increase anticipated next month. The article said policy makers are likely to debate whether to signal that a smaller rate increase is possible in December.

Bloomberg 10/20/22

China’s top technology overseer convened a
series of emergency meetings over the past week with leading
semiconductor companies, seeking to assess the damage from the
Biden administration’s sweeping chip restrictions and pledging
support for the critical sector.
The Ministry of Industry and Information Technology has
summoned executives from firms including Yangtze Memory
Technologies Co. and supercomputer specialist Dawning
Information Industry Co. into closed-door meetings since
Washington unveiled measures to contain China’s technological
ambitions.
MIIT officials appeared uncertain about the way forward and
at times appeared to have as many questions as answers for the
chipmakers, people familiar with the discussions said. While
they refrained from hinting about counter-measures, officials
stressed the domestic IT market would provide sufficient demand
for affected companies to keep operating, the people said,
asking to remain anonymous on a sensitive issue.

Reuters 10/20/22

European Union leaders ended another debate on the bloc's response to the energy crunch without agreement on whether to cap gas prices, deciding in the early hours of Friday morning to keep examining options to put a ceiling on costs.

Bloomberg 10/17/22

The European Union’s executive arm plans to
propose a mechanism to curb price volatility on the bloc’s
biggest gas marketplace and prevent extreme price spikes in
derivatives trading to rein in the region’s energy crisis.
The temporary mechanism designed by the European Commission
would impose a dynamic price limit for transactions on the Dutch
Title Transfer Facility, whose main index is the benchmark for
all gas traded on the continent.
“This will help avoid extreme volatility and price hikes,
as well as speculation which could lead to difficulties in the
supply of natural gas to some member states,” the commission
said in a draft document seen by Bloomberg News.
The EU executive arm has a policy of not commenting on
documents that haven’t been published and the draft may still
change before adoption scheduled for Tuesday. In the next step,
the package will be discussed by EU leaders at their summit on
Oct. 20-21 in Brussels.
The package of measures would also include a temporary
intra-day price spike cap mechanism to avoid extreme volatility
in energy derivative markets, according to the draft. The aim is
to “ensure sounder price formation mechanism,“ protecting the
region’s energy companies from large spikes and helping them
secure supply in the medium term.

Bloomberg 10/18/22

The commission’s plan will be discussed by EU leaders at a
summit on Oct. 20-21 in Brussels. They may endorse a plan to
“explore a temporary dynamic price corridor on natural gas” that
would be implemented before a new LNG index is in place and are
likely to support joint gas purchases, according to a draft
political statement by the heads of government seen by Bloomberg
News. In the next step, energy ministers will debate the
specifics at a gathering in Luxembourg on Oct. 25.

The common purchase platform would coordinate the filling
of gas reserves. If storage supplies are depleted at the end of
this winter, meeting the 90% filling goal by November 2023 may
be more difficult next winter, according to the commission. The
plan is to mandate member states to jointly purchase enough gas
to account for at least 15% of their storage and allow companies
to form a European consortium to negotiate long-term contracts.
Russian supply sources would be excluded from participation.

The package will also offer tools for member states to use
state aid to mitigate the impact of high energy crisis on
companies and households, with member states offered the
possibility to use as much as €40 billion from the bloc’s
cohesion funds. To boost liquidity in energy markets, the
commission will propose increasing the clearing threshold for
non-financial counter parties to €4 billion and broadening the
list of eligible assets that could be used as collateral for one
year.

Bloomberg 10/20/22

President Xi Jinping has accumulated so many
titles he’s been called the Chairman of Everything. But one
gaining traction among Communist Party elites is raising
concerns of a Mao Zedong-style personality cult.
Lingxiu, or “leader,” is a revered title of praise
previously reserved for Mao, the founder of the People’s
Republic, who was referred to as “the great leader” when the
Cultural Revolution started in 1966. While party officials and
state media have occasionally bestowed the title on Xi in the
past few years -- in the form of renmin lingxiu, or “people’s
leader” -- this week has seen more cadres using the term,
including at least two Politburo members.
Beijing party chief Cai Qi, a close ally of Xi, said Sunday
afternoon that the past decade has proven the Chinese president
is the “people’s leader who has heartfelt love from us.” Wang
Chen, a senior lawmaker, also used the phrase to extol Xi during
a discussion of the Hubei province delegation on Monday morning.
“General Secretary Xi Jinping is the outstanding figure of
our great era, the people’s leader that all people look up to,”
Tian Peiyan, deputy head of the Central Committee’s Policy
Research Office, told a press briefing Monday on the sidelines
of the party congress, at which Xi is expected to secure a third
term in office.

Bloomberg 10/13/22

Treasury Yields, Dollar Jump on Hot CPI
Treasury yields jumped across the curve, led by the short-end, after US CPI came in hotter than expected. The dollar shot up and erased earlier losses.

Bloomberg -- Traders are now betting the Fed will get even more aggressive than it set out to. Overnight index swaps for March 2023 surged to 4.92%.
(H/t Edward Bolingbroke)
That’s a dramatic shift from just two weeks ago, when investors were betting the Fed won’t even get to its 4.6% median dot plot for 2023.

10/12/22

FOMC Minutes
Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action. Several participants underlined the need to maintain a restrictive stance for as long as necessary, with a couple of these participants stressing that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation. Several participants observed that as policy moved into restrictive territory, risks would become more two-sided, reflecting the emergence of the downside risk that the cumulative restraint in aggregate demand would exceed what was required to bring inflation back to 2 percent. A few of these participants noted that this possibility was heightened by factors beyond the Committee's actions, including the tightening of monetary policy stances abroad and the weakening global economic outlook, that were also likely to restrain domestic economic activity in the period ahead.

Bloomberg 10/12/22

Australia’s neutral interest rate is probably at least 2.5%, a senior Reserve Bank official said, while adding that the level is more of an aid for policy than a goal to achieve.
RBA Assistant Governor Luci Ellis made the estimate in a speech in Sydney on Wednesday, seeking to shine a light on the central bank’s modeling of the theoretical level where policy neither stimulates or restrains demand.